CLEAR CHANNEL DEFENDS SIZE BEFORE SENATE COMMERCE COMMITTEE

Clear Channel Communications Chmn. Lowry Mays defended size and influence of his company to Senate Commerce Committee as those concerned about consolidation of radio stations accused Clear Channel of engaging in anticompetitive practices. Mays’s defense included debate with Senate Commerce Committee Chmn. McCain (R-Ariz.) on how much market share his company held. Since Telecom Act of 1996, which relaxed radio ownership rules, Clear Channel has grown to 1,200 stations from 60. Mays also defended Clear Channel on accusations that ownership of concert promotions dictated which acts got more air time.

While some senators, including McCain, ranking Democrat Hollings (S.C.) and Dorgan (D-N.D.) expressed concerns about consolidation, others, including Burns (R-Mont.), Ensign (R- Nev.), Smith (R-Ore.) and Brownback (R-Kan.) questioned need for regulations when market forces appeared to be at work. McCain said hearing was first in series on media ownership that would examine other issues such as TV broadcast and newspaper ownership.

McCain asked several pointed questions of Mays and NAB Pres. Edward Fritts about allegations that consolidation was leading to unfair competitive advantages. He asked both Mays and Fritts whether they were aware of cash or gifts’ being exchanged for radio air time, to which both said they weren’t. McCain said to Fritts: “I'm very interested in your statement that your members do not take cash or gifts in exchange for airplay.” He asked whether Clear Channel planned to buy more stations, interrupting Mays 3 times to repeat question. Mays eventually said: “If we can better serve the local community and we see an opportunity, yes.” McCain also asked Mays whether there should be any limit on radio ownership, to which Mays replied companies should be able to own as many stations as Telecom Act allowed.

Fritts said NAB supported TV ownership caps, but not radio caps, because of difference in media. Since there are 13,000 radio stations, but just 1,300 TV stations, Fritts said 35% ownership cap for broadcasters was more appropriate. Some senators questioned whether there was distinction between consolidation in radio and in other areas. Smith said same hearing could be held for airlines, banks and several other industries. Rep. Berman (D-Cal.) testified he had asked Justice Dept. to investigate Clear Channel on antitrust concerns, but agency hadn’t returned phone calls. Hollings said it could be appropriate to call DoJ before committee to question it about antitrust enforcement of radio. However, McCain said he questioned need for DoJ involvement when FCC was charged with monitoring media ownership issues.

Both sides of ownership debate brought scores of statistics to hearing. Mays said Clear Channel owned just 9% of all radio stations, to which singer Don Henley countered that company owned 82% of popular music stations. He said top 5 radio chains formerly generated 20% of industry revenue but now had 55% of all money spent on local radio. Mays said Clear Channel operates variety of formats, including news, popular, rock, country and urban formats. But Jenny Toomey, exec. dir., Future of Music Coalition, said many formats now overlapped, and cited 76% overlap of “2 distinct formats.”

Consolidation in radio industry isn’t as bad as other industries, Mays said, where 10 largest radio operators account for just 48% of industry’s advertising revenue. Top 5 record companies control 84% of all album sales, 10 largest cable companies account for 89% of revenue and top movie studios grab 99% of revenue. But Toomey said radio should be held to different standard because “radio is not private property, but a public resource regulated by the government on behalf of citizens.” Minority ownership of media also was raised as concern and McCain said he would reintroduce bill that would give women and minority owners tax incentives to own telecom companies. Both Mays and Fritts said they “strongly” supported such effort.

Mays said concert promotion was only 7% of Clear Channel business and company wouldn’t risk harming radio side of business by boycotting acts because of agreements with other concert promoters. Henley said Clear Channel concert promotions constituted 95% of that industry.

McCain and Mays got into dispute about exact size of Clear Channel. After Mays said characterization of company as holding 27% of marketplace was inaccurate, McCain dispatched staff, who returned with BIA Financial Networks report showing Clear Channel to have revenue of $3.5 billion -- 27.5% of all radio revenue. Mays said report was inaccurate and Clear Channel had only 18.7%, but McCain said until Mays supplied his own reporting on revenue, he would continue to cite BIA report.

Brownback also questioned artists’ efforts to advance Webcasting royalty legislation that he said could have “ultimately driven many small Webcasters out of business.” As for artists’ efforts to obtain royalty payments from Webcasters, Brownback said: “The artist community was only too willing to mow down diversity in favor of their own financial self-interest.” But Henley said that U.S. was only country in “free world” that didn’t pay performers royalties for their radio broadcasts. He also said artists supported original U.S. Copyright Office royalty rates, which he said was first time they had ever gotten royalties for their radio performances. Henley said artist groups pushed for small Webcaster royalty bill from “day one.”

Brownback said he would pay close attention to see how Webcasting royalties affected nascent Internet radio market. “Webcasting -- whether provided through wireline Internet connections or especially wireless Internet connections when such capabilities develop -- is exactly the kind of distribution outlet that could be invaluable for publicizing new and unknown artists, increasing artists’ direct access to the public without middlemen and further increasing competition in the radio industry generally,” Brownback said.